Redding Electric Utility is mentioned in today’s Bloomberg.com story.
Here are excerpts:
Taxpayers from Massachusetts to California are paying Wall Street banks to end derivative contracts gone bad as they exit the collapsing auction-rate bond market, with penalties in some cases topping $10 million and compounding the pain of rising borrowing costs. …
… Redding, California, expects to pay Citigroup $6.7 million to close out a swap on $67.3 million of auction-rate bonds it sold, said Tom Graves, financial manager of the city’s electric system, the recipient of the proceeds.
It refinanced the bonds on April 28, selling fixed-rate debt because it was concerned variable rates in the municipal market might shoot up again, he said. Danielle Romero-Apsilos, a spokeswoman for Citigroup, declined to comment.
“It was a very good alternative while it worked,” Graves said in reference to the use of auction bonds combined with fixed-rate swaps. “Our feeling was that there was still uncertainty in the marketplace that hadn’t been resolved.”
To read the entire story click here.Â
